Lack of funding hampering UK’s SMEs

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In light of recent research from a leading challenger bank and news of Funding Circles widening losses and tightening criteria of who it will lend to, Foundation East, East of England’s only responsible finance provider offering loans and support to the region’s legions of SMEs, sends out a message of reassurance: “We’re still here and we’re still providing loans to businesses throughout the region. So long as you have a viable business plan and the skills to deliver, we can help…”

Recent research from the leading alternative bank Aldermore revealed that almost one in five SMEs in the UK have missed a new opportunity in the past 12 months due to a lack of available funding. Those impacted miss out on income worth an average of £76,888 a year, according to the Future Attitudes study.

Meanwhile, another leading alternative provider of finance to SMEs, Funding Circle, has announced record losses. Acknowledging that higher risk loans, which make up around 15 percent of its portfolio, have deteriorated over the last three years, the peer-to-peer lender has tightened its rules regarding who it will lend to.

“SMEs are the lifeblood of our economy. It is vital that they can continue to thrive in these uncertain times. Recent news relating to lack of funding and tightening of rules regarding who finance providers will lend to is not good for the country, or our region,” explains Katy Ford, chief executive of Foundation East.

“According to government statistics, of our region’s 264,000 enterprises, 99.6 percent are SMEs. Our economic resilience depends on these businesses being able to get the funding they need to survive and grow,” she continues.

Foundation East is a not for profit responsible finance company specialising in providing loans and business support to the region’s SMEs. It reinvests all of its profits back into this local business community. Soon to enter its fifteenth year of trading, it has supported more than 600 businesses in the region with loans and advice to date. These businesses have created more than 1250 jobs. The positive impact this has on the public purse in terms of increasing tax contributions and decreasing people’s reliance on benefits is considerable. In fact, for every £1 Foundation East spends supporting the region’s SMEs, it generates £15 local social and economic impact.

“Thanks to our experience helping high risk SMEs manage their finance, our story is very different to Funding Circle’s. Whilst, like them, we have a portfolio of high-risk SMEs, our default rate has been decreasing over the last three years. Thanks to this, and the rise of socially responsible companies and individuals purchasing our Community Investment Tax Relief (CITR) Shares (whilst enjoying 25 percent tax relief over five years on their investment), we’re still here and we’ve still got money to lend.”

As to who Foundation East lends to it’s as simple as ‘if you’ve got a viable business plan and the experience and expertise to deliver it, we’ll consider your application and if appropriate, will lend to you’, according to Katy. And, in relation to what SMEs in the region are seeking funding for, Foundation East is seeing a similar pattern to Aldermore:

“Aldermore’s findings support what we ourselves are seeing in terms of loan purposes. Their report cites that, in terms of the purpose of the loans those surveyed were looking for: 37% were focused on scaling up, 24% on developing and expanding their products and services and 21% on domestic expansion. Cash flow was identified as the biggest concern, with 25% citing it as such.

“We have made loans to businesses in the region for all of these purposes. For example, we’ve helped:

  • Award winning social entrepreneur Kath Austin to scale up her environmental impact focussed wax food wrap business Bee Bee Wraps

  • Cambridge MBA student, Tom Ellum,develop and expand products and services for his fair and sustainable food focussed social enterprise, Storimarket

  • Norfolk-based Paul Beckett expand ONKK Ltd, a small manufacturing firm producing precision-built, high quality, high value turntables

“Cashflow is a huge concern for most of our customers, and part and parcel of the support we provide alongside the loan is enabling clients to put policies and practices in place that ensure they better manage cashflow,” she concludes.

To apply for a loan from Foundation East, visit https://www.foundationeast.org/loans/enquiry.aspx

If you are interested in purchasing CITR shares in Foundation East, benefitting from 25 percent tax relief on amount invested over five years as well as the feel-good factor of knowing you are supporting your region’s economic resilience, visit https://www.foundationeast.org/invest/Invest.aspx

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